Debit interest confusion

modelreject

Hi,

I have a variable tracker mortgage where I can overpay as much as I like each month. This was the first month I overpaid, by £1,500. This obviously shows in my account as -£1,500 from my mortgage...but 13 days later it states 'debit interest' and has added 811.93 back on to my total to pay.

What is this and where has the rest of the money I put in went to?

Many thanks,
C

anselld

The first month repayment often covers more than 1 month of interest in order to cover any additional days borrowing between when you received the advance and the normal mothly interest date. Should be detailed somewhere in your offer docs.

modelreject

Apologies, this is my first mortgage and still getting used to some of the terms and costs.


"The first month repayment often covers more than 1 month of interest in order to cover any additional days borrowing between when you received the advance and the normal mothly interest date. Should be detailed somewhere in your offer docs."

My mortgage payment is £500 and that's it, every month. Why is it that when I pay in £1,500 that I am charged over £800?

From bank's website about my mortgage..."No restrictions on making overpayments or lump sum payments and as interest is calculated daily, this means you get the benefit straight away"

Thanks again for any help.

GMS

Has your interest rate changed? Although bank base rate hasn't changed has your tracker rate changed, i.e BBR + 1% changed to BBR + 2.5%?

modelreject

No. The online account shows that next month the same amount of money is to be taken out. Has always been the same. Only had mortgage 4 months. Also, even if there was an increase, taking £800 from my overpayment of £1,500 seems extreme and doesn't make sense.

Thanks for any more help in resolving this. waiting for bank to get back to me.

GMS

The £1500 overpayment may be calculated daily but applied annually. If this is the case you will see it at year end and all should adjust.

See aht the bank say when they come back to you.

modelreject

Sounds like a reason. Seems odd and what if the interest rate does go up, then they will charge me more come year end.

If it is calculated annually, if I overpay next month there should be no deduction?

Thanks

getmore4less

Whats the normal payment and when?

When does interest get added?

Do the previous months statements/on-line account show interest being added?

modelreject

Here is a summary if you could help please...

16.06.2010 Loan transfer -108,600.00 -108,600.00
30.06.2010 Debit interest -133.44 -108,733.44
16.07.2010 Transf 514.16 -108,219.28
16.08.2010 Transf 514.16 -107,705.12
16.09.2010 Transf 514.16 -107,190.96
17.09.2010 Mortgage Overpayme 1,500.00 -105,690.96
30.09.2010 Debit interest -811.93 -106,502.89

Thanks again!

GMS

modelreject wrote: »

Here is a summary if you could help please...

16.06.2010 Loan transfer -108,600.00 -108,600.00
30.06.2010 Debit interest -133.44 -108,733.44
16.07.2010 Transf 514.16 -108,219.28
16.08.2010 Transf 514.16 -107,705.12
16.09.2010 Transf 514.16 -107,190.96
17.09.2010 Mortgage Overpayme 1,500.00 -105,690.96
30.09.2010 Debit interest -811.93 -106,502.89

Thanks again!

Looks like your interest is being applied quarterly.

30.06 interest would be from the date of funds advanced up to end of June. Next interest added 3 months later.

Are you linked to Bank Base Rates or LIBOR?

LIBOR is calculated every 3 months so may explain that.

modelreject

Linked to bank base rate which normally follows BOE base rate.
Thanks for the info. Got a call form the mortgage advisor and said that the debit interest would decrase over time and that most of the money paid in would be capital. Getting my head round all this slowly, but all starting to make sense with the help of you guys :T

So basically, if I keep paying in £514 for the next three months that will equal £1542, but what with interest I will only have made a dent of around £700 pounds?

Thanks